Kalbasi v The State of Western Australia
[2015] WASC 317
•24 AUGUST 2015
KALBASI -v- THE STATE OF WESTERN AUSTRALIA [2015] WASC 317
| SUPREME COURT OF WESTERN AUSTRALIA | Citation No: | [2015] WASC 317 | |
| 24/08/2015 | |||
| Case No: | CPCA:136/2010 | 10 AUGUST 2015 | |
| Coram: | MITCHELL J | 10/08/15 | |
| 12 | Judgment Part: | 1 of 1 | |
| Result: | Application dismissed | ||
| B | |||
| PDF Version |
| Parties: | POUYAN KALBASI NAZGOL AFSARPOUR PARVIS KALBASI FATEMAH BADIEH BORDBAR MOOJAN KALBASI OMEED MEHDIZADEH ARMAN GHODRATI THE STATE OF WESTERN AUSTRALIA |
Catchwords: | Criminal property confiscation Procedure Application to make continuation of freezing order subject to conditions Circumstances in which freezing notices replaced by freezing order |
Legislation: | Criminal Property Confiscation Act 2000 (WA) |
Case References: | Director of Public Prosecutions (WA) v Mansfield [2006] WASC 255 Director of Public Prosecutions (WA) v Yeo [2012] WASC 440 F Hoffmann-La Roche & Co AG v Secretary of State for Trade and Industry [1975] AC 295 Kirklees Metropolitan Borough Council v Wickes Building Supplies Ltd [1993] AC 227 Mansfield v Director of Public Prosecutions (WA) [2006] HCA 38; (2006) 226 CLR 486 |
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
- IN CHAMBERS
- First Plaintiff
NAZGOL AFSARPOUR
Second Plaintiff
PARVIS KALBASI
Third Plaintiff
FATEMAH BADIEH BORDBAR
Fourth Plaintiff
MOOJAN KALBASI
Fifth Plaintiff
OMEED MEHDIZADEH
Sixth Plaintiff
ARMAN GHODRATI
Seventh Plaintiff
AND
THE STATE OF WESTERN AUSTRALIA
Defendant
Catchwords:
Criminal property confiscation - Procedure - Application to make continuation of freezing order subject to conditions - Circumstances in which freezing notices replaced by freezing order
Legislation:
Criminal Property Confiscation Act 2000 (WA)
Result:
Application dismissed
Category: B
Representation:
Counsel:
First Plaintiff : Mr C E Chenu
Second Plaintiff : Mr C E Chenu
Third Plaintiff : Mr C E Chenu
Fourth Plaintiff : Mr C E Chenu
Fifth Plaintiff : Mr C E Chenu
Sixth Plaintiff : Mr C E Chenu
Seventh Plaintiff : Mr C E Chenu
Defendant : Mr M Seaman
Solicitors:
First Plaintiff : Bennett + Co
Second Plaintiff : Bennett + Co
Third Plaintiff : Bennett + Co
Fourth Plaintiff : Bennett + Co
Fifth Plaintiff : Bennett + Co
Sixth Plaintiff : Bennett + Co
Seventh Plaintiff : Bennett + Co
Defendant : Director of Public Prosecutions (WA)
Case(s) referred to in judgment(s):
Director of Public Prosecutions (WA) v Mansfield [2006] WASC 255
Director of Public Prosecutions (WA) v Yeo [2012] WASC 440
F Hoffmann-La Roche & Co AG v Secretary of State for Trade and Industry [1975] AC 295
Kirklees Metropolitan Borough Council v Wickes Building Supplies Ltd [1993] AC 227
Mansfield v Director of Public Prosecutions (WA) [2006] HCA 38; (2006) 226 CLR 486
- MITCHELL J:
(This judgment was delivered extemporaneously on 10 August 2015 and has been edited from the transcript.)
1 On 26 October 2011, Registrar Whitby of this court made a freezing order which applied to property at 33 Frederick Street, Belmont (Belmont property), as well as other property (Order). The plaintiffs seek an order that the continuation of the Order be subject to the provision of an undertaking as to damages by the Director of Public Prosecutions (DPP), or the State, in accordance with the usual form of undertaking by a date to be specified in the order.
Procedural background
2 The plaintiffs originally sought to set aside a freezing notice issued by a justice of the peace (JP) on 17 November 2010, and now seek to set aside the Order, pursuant to s 84(1) of the Criminal Property Confiscation Act 2000 (WA) (Act). The circumstances in which the applications arise are set out in a statement of agreed facts which has been filed in these proceedings and includes the following matters.
3 On 17 November 2010, a JP issued a freezing notice for property which included the Belmont property. The only ground on which the freezing notice was issued was that the first plaintiff had been charged with an offence and could be declared a drug trafficker under s 32A(1) of the Misuse of Drugs Act 1981 (WA) if the first plaintiff was convicted of the offence, and that the JP had carried out investigations and believed the property frozen by the freezing notice was owned and/or effectively controlled and/or had been given away by the first plaintiff.
4 On 29 November 2010, a memorial of the freezing notice was registered under s 113(1) of the Act, in accordance with s 38(1) of the Act. On 26 October 2011, a freezing order was made for property which included the Belmont property pursuant to s 43(5) of the Act.
5 The statement of agreed facts also indicates that that freezing order had never come into force as no memorial in respect of the making of the freezing order had been lodged against the title of the property. I am informed by the parties that, since the statement of facts was agreed, that has been remedied and the Order has indeed been registered against the title of the property.
6 The first plaintiff was convicted of a serious drug offence and was declared to be a drug trafficker on 11 May 2011. However, that conviction was set aside on 17 October 2013. The Court of Appeal set aside the drug trafficker declaration by consent on 19 November 2013.
7 The first plaintiff was re-tried, again convicted, and declared to be a drug trafficker on 1 October 2014. The consequence of the making of that declaration is that all of the property, within the meaning of the Act, that the first plaintiff owned or effectively controlled at the time he was declared to be a drug trafficker, and all property that he gave away before that time, was confiscated. The conviction and the drug trafficker declaration made on 1 October 2014, are both subject to a pending appeal to the Court of Appeal.
Plaintiffs' position
8 The Belmont property is held by the first plaintiff under the terms of a discretionary trust (Trust) of which the first, second, third, fourth and fifth plaintiffs are objects of discretionary power of appointment provided for in the trust instrument. The plaintiffs object to the confiscation of the Belmont property on three grounds.
9 Firstly, they contend that the first plaintiff did not own the equitable interest in the Belmont property because he held those interests as trustee of the Trust.
10 Secondly, it is submitted that the first plaintiff did not have 'effective control' of the Belmont property, within the meaning of s 156 of the Act, because he had at the relevant time the legal estate in the Belmont property.
11 Thirdly, the plaintiffs contend that the Belmont property is not property which the first plaintiff gave away at any time before the making of the drug trafficker declaration. This contention was accepted by the defendant.
Defendant's position
12 The defendant says that the interests of the plaintiffs in the Belmont property as beneficiaries of the Trust are not property and accordingly, the plaintiffs cannot succeed in their objection. The defendant says the only property interest present in this case is the first plaintiff's legal title in the Belmont property, which is confiscated but which has yet to vest in the State under s 9 of the Act, as the State will not seek a declaration of confiscation pending the outcome of the first plaintiff's appeal against conviction.
13 The ultimate confiscation of the Belmont property depends not only on the outcome of these arguments, but also upon the drug trafficker declaration made by the District Court surviving the first plaintiff's pending appeal.
Prejudice suffered by plaintiffs
14 The continuing effects of the freezing order are deposed to in the affidavit of the second plaintiff, affirmed on 13 July 2015, in the following terms:
The Belmont Property is mortgaged to the St George Bank (Bank). I am informed by my solicitors and verily believe that the Bank's solicitors, Sparke Helmore, informed [my] solicitors that the Bank considered [the first plaintiff] in his capacity as trustee of the Trust was in default of the [mortgage] Facility by reason of the Belmont Property having become subject to freezing, and as a result the Bank was entitled to and is charging default interest at a rate 3% above the interest rate it would otherwise charge under the Facility.
Default interest is presently being imposed in the amount of more than $5,000 a month … It is my understanding that the rate of interest that is being charged without taking into account the 3% default interest, is higher than the rate which the Bank normally charges on commercial property loans … Because the property is frozen, and despite generally falling interest rates over the past 4 years, it has not been possible to negotiate a lower rate with the Bank.
Since [the first plaintiff's] conviction on 1 October 2014 following his retrial, he has lodged a further appeal against his conviction. A date for the hearing of that appeal has not yet been set by the Court of Appeal.
Power to make continuation of freezing order subject to conditions
15 On the present application, the plaintiffs' submission is that no undertaking as to damages has been proffered by the defendant, nor required by the court, as a condition of the imposition of the freezing notice or freezing order. They submit that such an undertaking ought to be required as a condition of the continuation of the freezing order.
16 The plaintiffs note that where a court makes an interlocutory order on limited contested evidence, which proves not to be justified on the provision of further evidence, the person affected by the order has no automatic right to compensation. They also point to s 137 of the Act, which relevantly provides that the State is not liable for anything done or default made in good faith and for the purposes of carrying the Act into effect.
17 The plaintiffs therefore submit that to protect the interests of a person affected by a freezing order which is ultimately set aside, the order ought generally be subject to a condition that an undertaking be given by the DPP or the State to pay any damages which may be suffered in the event the freezing order is shown to have been unjustified.
18 The plaintiffs say that s 43 of the Act authorises this court to require the DPP to provide an undertaking as to damages as a condition for the continuation of the Order. As authority for that proposition the plaintiffs rely on Mansfield v Director of Public Prosecutions (WA) [2006] HCA 38; (2006) 226 CLR 486 [22]. The order sought in that case was an order requiring the DPP to provide an undertaking as to damages as a condition for the continuation of a freezing order which was already in effect. The court concluded:
The situation is sufficiently dealt with by holding that, within the authority conferred by s 43 of the Act, the Supreme Court had the power (albeit not the duty) to require the provision of an undertaking and, if this was not offered or was offered in unsatisfactory terms, the Supreme Court was at liberty to refuse the freezing order sought by the DPP [46].
19 It appears to be implicit in that decision that it was also within the power of the court to make the continuation of an already-granted order subject to the provision of an undertaking. That was what happened when the matter came back before Blaxell J in Director of Public Prosecutions (WA) v Mansfield [2006] WASC 255. That approach was also adopted by Kenneth Martin J in Director of Public Prosecutions (WA) v Yeo [2012] WASC 440.
20 Those authorities support the proposition that s 43 of the Act implicitly authorises this court to require an undertaking as a condition for the continuation of an order which has already been made.
21 In Mansfield, the majority of the High Court considered that the basis on which the State (or the Director as agent of the State) could be required to give an undertaking as to damages as a condition for the grant of continuation of a freezing order [44] - [45].
22 The statement of principle more favourable to the State, of those referred to in those paragraphs of the majority's judgment, was that of Lord Goff in Kirklees Metropolitan Borough Council v Wickes Building Supplies Ltd [1993] AC 227, where his Lordship said, referring to F Hoffmann-La Roche & Co AG v Secretary of State for Trade and Industry [1975] AC 295:
It was decided, first, that in actions brought by the Crown to enforce or protect its proprietary or contractual rights, it should be in no different position from the ordinary citizen and so should be required to give an undertaking in the usual way. But, second, it was held that different principles applied in cases where the Crown brought a law enforcement action, in which an injunction was sought to restrain a subject from breaking a law where the breach would be harmful to the public or a section of it (272).
23 The High Court in Mansfield then went on to say:
However, the jurisdiction under the Act to make freezing orders does involve the protection of the prospective or contingent (it is unnecessary to choose between these terms) property rights of the State. It is more difficult to categorise the freezing order procedure purely as 'a law enforcement action' in the sense used in the House of Lords [46].
24 In Yeo, Kenneth Martin J made the following general observations with which I agree:
It is important to understand the purpose and effect of an undertaking as to damages. The undertaking as to damages originated in the practice of the courts of equity. Before the court granted an interlocutory injunction preserving the status quo up to trial, it would almost invariably require the party seeking the injunction to provide an undertaking as to damages. That is to say, the party seeking the injunction was required to give an undertaking that, if it failed at trial, it would make good the loss or damage suffered by the party the subject of the interlocutory injunction as a result of the interlocutory injunction being granted.
One can see the basis in fairness for orders of that kind, because such interlocutory orders are made without final determination of the merits of a case. They are made on an assessment by reference to well-known considerations. But they by no means reflect the final outcome of a trial. If the final outcome of the case is adverse to the party who obtained the pre-trial orders, it is only right, just and fair that the party who obtained them should bear some measure of responsibility for their adverse consequences in the meantime. That is the price of an interlocutory injunction [7] - [8].
25 In Cardile v LED Builders Pty Ltd [1999] HCA 18; (1999) 198 CLR 380, the High Court also observed (in the context of Mareva orders) that ordinarily where a private interest seeks an order restraining dealings with property '[i]t is difficult to conceive of cases where such an undertaking would not be required' [53].
26 In its written submissions, the plaintiffs said the following, which I generally accept:
In this case, unless the Court orders otherwise, the first plaintiff is prevented from dealing with the property he holds as trustee in any way. Inherent financial prejudice will inevitably be associated with that inability. More fundamentally, the imposition of the Freezing Order has been treated as an act of default by the mortgagee of the Belmont Property justifying the charging of interest at a higher, default rate. The undertaking as to damages is a protective measure which may give to the plaintiffs (who have been made the subject of intrusive restraints) some degree of interim protection should the State's application for declaration of confiscation of the Belmont Property ultimately fail.
…
The awarding of compensation on an undertaking to the court is ultimately subject to the discretion of the Court. The exercise of the discretion is subject to fundamental considerations of justice. So much is clear from the very wording of the usual undertaking, '… such compensation as the court may in its discretion consider in the circumstances, to be just...' Accordingly, discretionary considerations as to whether in fact any compensation should, in all of the circumstances of the matter, be justly ordered to be paid by a party affected by the restraints of a freezing order, fall to be considered at the time the party in whose favour an undertaking is given, asks the Court to award compensation.
Accordingly, the provider of the undertaking may at that time raise (and the Court must consider) any circumstance affecting the just exercise of the discretion whether to order compensation to be paid on the undertaking. It is not appropriate for such discretionary matters to be considered at the point in time when the undertaking is required to be given [21], [27] - [28]. (original emphasis) (footnotes omitted)
Defendant's contentions
Basis for confiscation
27 The DPP seeks to distinguish decisions such as Mansfield and Yeo by reference to the different grounds on which the DPP contended the frozen property was liable to confiscation in those cases. I do not consider the nature of the relief ultimately sought to be a significant point of distinction for the purposes of applying the ordinary requirement that an undertaking will be required as a price for obtaining a freezing order of this kind.
Strength of case for confiscation
28 The DPP also refers to the strength of his case for a continuation of the freezing order and the prospects he might ultimately have of obtaining a declaration of confiscation under s 30 of the Act. The DPP submits that his case for continuation of the freezing order is strong, as the first plaintiff has been convicted twice of the offence which is a pre-condition to confiscation, and the court has before it all of the material required to make its own conclusion regarding the merits of any application under s 30. Those matters are also relevant to the merits of the continuing freezing order. The DPP's case may well be strong, and if it ultimately succeeds then an undertaking will not be called upon.
29 However, if for some reason the DPP does not succeed in establishing that the property should be confiscated, then, absent an undertaking, the plaintiffs will be left out of pocket by reason of the continued operation of the freezing order.
30 I do not see the perceived strength of the DPP's case for confiscation as precluding a requirement for an undertaking in the circumstances of this case.
DPP performing a public function
31 The DPP also relies on the following observations of Blaxell J in Mansfield:
Self-evidently, the DPP performs a similar public function when applying for and obtaining a freezing order under the Act. This is so notwithstanding that the purpose of a freezing order is to protect the prospective or contingent property rights of the State. Accordingly, the public duty and statutory role of the DPP are factors which should ordinarily be afforded significant weight when the court is determining whether or not to require an undertaking as a condition of making or continuing a freezing order [16].
32 I accept that to some extent it is relevant to take into account the fact that the DPP is not an ordinary litigant and performs a public function. However, the essence of the public function which is being performed is the obtaining of an order to protect the claimed property rights of the State. Further, I have some difficulty in reconciling Blaxell J's view that the statutory role of the DPP 'should ordinarily be afforded significant weight' with the High Court's observations in Mansfield [46].
33 If the State seeks a freezing order from the court to protect its property interests, and the order will naturally result in financial loss to others claiming an interest in the property, then the justice of the case will usually favour requiring the State to give an undertaking as the price for a protective freezing order.
Circumstances in which freezing order made
34 Recognising that that is the usual position, it is necessary to refer to the particular circumstances in which the Order came to be made on 26 October 2011. It was accepted by the plaintiffs that the property had been frozen pursuant to a freezing notice, and the plaintiffs sought and obtained the agreement of the DPP to cause the freezing notice to be cancelled and replaced with a freezing order to the same effect, subject to the exclusion of certain property from the order and an order vesting control and management of the Belmont property in the first plaintiff. The Belmont property was a commercial property which was tenanted at the time.
35 The plaintiffs accepted that, while the property was subject to a freezing notice, they had no opportunity to seek an undertaking as a condition for the continuation of the freezing notice.
36 It does seem to me to be a significant factor for the exercise of my discretion that the plaintiffs requested the cancellation of the freezing notice and its substitution with a freezing order to allow orders to be made excluding certain property and vesting management of the property in the first plaintiff.
37 The plaintiffs' counsel accepts that an undertaking for damages would not appropriately have been sought or imposed at the time the freezing order was made, given the circumstances in which that order was requested by the plaintiff. Counsel also accepts that there would have been strong discretionary considerations against requiring an undertaking if it had been sought immediately or shortly after the freezing order had been made.
38 The plaintiffs refer to the fact that now almost five years have passed and the matter has still not been resolved, although it is accepted that the delay is not the fault of any party to these proceedings. In my view, the delay does not alter the fact that the freezing notice was converted into a freezing order largely to accommodate the interest of the plaintiffs in the Belmont property being preserved and income continuing to be generated by that property.
39 Against that proposition, counsel for the plaintiffs submits that the preservation of the property and income was also in the interest of the DPP, given that the DPP sought to have the property confiscated to the State. However, the fact that the freezing order arose from the plaintiffs' request for a change in the status of the restraint applied to the property seems to me to be a powerful consideration against requiring an undertaking in the circumstances of this case.
Public policy
40 Counsel for the defendant says that there are public policy reasons for not requiring an undertaking to be given in these circumstances, because orders to that effect would create a significant disincentive for the State and DPP to agree to the setting aside of a freezing notice, which cannot be made subject to an undertaking, and its substitution with a freezing order which can. I accept that that aspect of public policy is relevant to the exercise of my discretion, but would not state a universal rule to be applied in all cases. It will always be necessary to consider all of the circumstances of the particular case.
Conclusion
41 In the particular circumstances of this matter, it seems to me that the fact that the freezing order was made, in effect, at the plaintiffs' request, leads to the conclusion that the fairness of the case does not demand the provision of an undertaking. The plaintiffs' oral application for an order in the terms I have indicated will be dismissed.
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